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Frosty Piss writes "Despite earning more than $1 billion in profits last year, social media juggernaut Facebook paid zilch when it came to federal and state taxes in 2012. In fact, the website will actually be getting a refund totaling $429 million thanks to a tax reduction for executive stock options. In the coming years, Facebook will continue to get monster tax breaks, totaling about $3 billion. 'The employees cash in stock options, and at that point there is tax deduction for the company,' Robert McIntyre, of watchdog group Citizens for Tax Justice, said. 'Because even though it doesn't cost Facebook a nickel, the government treats it as wages and they get a deduction for it.'" (That's not to say that Facebook employees' salaries didn't get taxed.)

This is normal in that generally, in the US tax code, you can defer paying taxes by paying employees more, by making investments, etc. Only if that dollar you collect becomes profit do you generally pay taxes on it.

It's not a rich vs poor thing either. Poor people get tax benefits in the form of the EIC and the personal deduction. Middle income earners get to deduct health care expenses and certain job expenses (uniforms, union dues, sometimes use of a vehicle).

The point is that everyone gets tax breaks and the reason why is that our tax code is crazy complicated. Facebook will pay their share eventually, but it's just not going to be on their 2012 return.

Not true. If you work for a paycheck, and receive a W-2, you are screwed. But if you run your own business, or work as a contractor, most taxes are avoidable even for a "little guy."

I pay very little tax. My income is above the median, but I don't think many people would consider me rich. I own three domestic corporations (a Delaware C-corp, a California S-corp, and a Nevada S-corp), and an overseas Cayman Islands corporation. These cost just a few hundred bucks each to set up. Any middle class person could afford to do the same. I can report income through whichever jurisdiction and type of corp offers the best deductions for that particular type of income. I can move income between corps by selling "services" or paying license fees. I avoid paying personal taxes by living off non-taxable loans, rather than taxable income, from the corporations.

All of this is perfectly legal. I was audited by the IRS once, and had to pay a fine of $420 for a bookkeeping error, but otherwise they said everything was fine.

Of course these loopholes were set up for the rich, but there is nothing to stop the rest of us from using them too. If you think about it, we have a good system: people that don't mind paying taxes pay them, and those of us that prefer not to, don't.

I don't know the US legal system nor it's taxation, however I do know the Australian system.

For comparison, if you were doing that in Australia, particularly if you described it the way you have, you would easily fall under the Income Tax Assessment Act of 1936 Part IVA--Schemes to reduce income tax [austlii.edu.au]. At which point they would use section 177F to remove the affects of any benefit you're creating for yourself, tax you on the new amount, and depending on the severity of the situation, there could be fines and even jail time.

The difficulty in Australia is that to figure out this can take quite a lot of time and money, however the ATO has special divisions that target the ones they will get the most gain from. One of my lecturers at university was one of the people who worked at the ATO on high net worth individuals to try and figure out if they were dodging tax. He had a lot of insight on methods used to find people who were living off of loans from corporations which they themselves controlled or owned, such that they were re-classifying their income as expenses. It's actually really interesting how they go about it.

While I know the US is very different in this regards, I'd be somewhat surprised if something like this didn't exist in the US.

So for people who can be clever and manipulate their tax nexus -- doing absolutely zilch for the common man. They get to "win."

Someone else works hard, isn't clever with tax manipulation, ends up being ridiculed as a "burden on society" by Libertarians when he gets to retirement and only Social Security is available because Merrill Lynch screwed him on returns.

So from a purely citizen--oriented, non-tax manipulating perspective of a person who is more and more convinced we need to become a Socialist Democra

It was put there on purpose, to encourage business and spur employment.

And it is working brilliantly too! He has 4 businesses -- so clearly the "encourage business" part is working. And he works for all of them, thus he has 4 jobs!! That just has to look good on employment figures!

in the US tax code, you can defer paying taxes by paying employees more, by making investments, etc. Only if that dollar you collect becomes profit do you generally pay taxes on it.

I believe Facebook and other companies eliminate their profits by paying "licensing" fees to a shell subsidiary. This not an investment in any way, just rerouting the profits somewhere else to avoid taxes.

The point is that everyone gets tax breaks and the reason why is that our tax code is crazy complicated

In practice, it turns out that you get better tax breaks when you have a dedicated team of lawyers who can route your profits across international borders. I suspect I'd get higher tax breaks if I had headquarters in Dublin and a couple of subsidiaries in Cayman Islands.

Just like the equality in politics. Everyone can lobby the politicians -- but lobbyists get paid to do it full time and the rest of us have to take time off from our job. The amount of resources behind you make a big difference in practice, even if "everyone can do it"

The point is that everyone gets tax breaks and the reason why is that our tax code is crazy complicated.

This is the definite truth. I can personally vouch for the fact that the federal government just loves giving huge tax credits to incomes between $6000 and about $40,000 a year. Middle class people can generally find enough deductions to drop their tax burden and they also have most of the same "loopholes" available to them that rich people do.

The real problem with the tax code is that it's so complicated that a person has to be able to pay good money to shield their money from taxes, mostly by paying an expert to deal with the labyrinthine tax code. It just doesn't become economical to do so until that person has some serious assets.

Of course, corporate tax code is completely from individual tax code. I personally clicked into this article to see if anyone who knows more than I do had yet addressed the claim that offering stock options doesn't cost Facebook anything. No matter how much all of us - myself included - would like to see corporations pay more taxes, the fact is that most of the ways they avoid paying up (but certainly not all) involve giving the money to their employees or charities instead. And no matter what anyone else on Slashdot seems to think, anyone cashing out stock options for Facebook is (now) a rich person paying taxes on that income.

Apparently companies don't pay taxes [theregister.co.uk] (ref [archive.org]) in the sense that anything they do pay someone else gets to pay -- the employees, the customers, the shareholders, you name it.

Even without that caveat I'd be strongly in favour of a simple tax code, one that simply isn't complicated enough to have much in the way of loopholes. Perhaps a flat-fee on income, or a VAT if that really is a cheaper* tax overall to levy, tied to the yearly budget in a straight-forward way so that politician stupidity gives fairly direct feedback in your wallet, and then hopefully influences your voting.

Assuming that indeed, companies would shove off any taxes paid anyway, well, let them not pay taxes, let the people who receive income from the company do. The upside of that is that since more tax is coming from employees, it's now harder to hide taxables on other sides of borders.

The problem with that sort of thing, though, is that simplicity is a two-edged sword: The politicians no longer can hide their shenanigans either. Look at the debt rate. Eventually that's going to have to be paid back from taxes. And suddenly you're keenly aware of that fact.

* Where "cheaper" means less inefficiencies due to collecting and side effects.

This is the definite truth. I can personally vouch for the fact that the federal government just loves giving huge tax credits to incomes between $6000 and about $40,000 a year. Middle class people can generally find enough deductions to drop their tax burden and they also have most of the same "loopholes" available to them that rich people do.

$6000-$40,000 a year is NOT "middle class people", especially for a family. That would be more in the range of "severe poverty" to "barely enough to make it through"

The tax system should have deductions available to small and/or struggling businesses. But, the system is broken, and obviously so, when the most successful businesses routinely pay zero taxes.

The system is so very broken, that I'm willing to see all deductions killed off, and every person, every business in the United States charged a flat rate on income. No more special rates for stocks, bonds, etc. Income is income, no matter the source. Tax it all, with no deduction, no deferrals, nothing.

The ONLY concession I'm willing to make, is to tax net profit, rather than gross profit. But, I want a damned strict accounting of those gross and net profits. Very damned strict. To hell with those licensing schemes mentioned in other posts. And, no, we will not allow any foreign taxes paid to be deducted from taxes due in the US. If you have an office in Ireland, or wherever, you pay your taxes there - and you ALSO pay your taxes here. The offices in Ireland suddenly seem to be cost-ineffective? That's your problem - get rid of the office. That's up to you, though. We have no objections if you continue to piss your money away on some office that never served any purpose other than to cheat us out of taxes.

A few years back companies were literally printing money with their stock options. They could give any employee seven figures in stock without affecting their bottom line. So they did. In 2006 this was changed because it was unfair to all the other shareholders, who lost value in the company for each new share that was printed.

But if options are a business expense you can reduce your taxable profit by giving out lots of options.

To hell with those licensing schemes mentioned in other posts. And, no, we will not allow any foreign taxes paid to be deducted from taxes due in the US. If you have an office in Ireland, or wherever, you pay your taxes there - and you ALSO pay your taxes here.

I don't think it would be fair to tax foreign operations, if those foreign operations generate foreign income.

Therein lies the problem. Currently, a company that generates, say, 90% of its income in America is sending, say, 90% of its profits oversea

The ONLY concession I'm willing to make, is to tax net profit, rather than gross profit. But, I want a damned strict accounting of those gross and net profits. Very damned strict.

Net profit is taxed, not gross. If a company makes an investment allowed under the tax code, that takes away from the gross profit margin. Accounting is strict and it has to be because companies that have huge receipts and little or no profit are scrutinized. Fundamentally, the use of off shore cash migrations and segmenting the business into various profit and loss centers is at the heart of the problem. I can have very, very profitable operations in one country and losing interests elsewhere howev

There's nothing wrong with a progressive tax code with incentives. It does a lot of good. Nobody likes taxes because nobody likes to pay for anything, so it's always in fashion to say it's just broken. All we need to do is go back to a 90% top tax bracket (don't forget, you ONLY pay that 90 % on the amount OVER a certain threshold. So a billionaire pays the same as you do), and start raising the capital gains.

I keep hearing the job creators will stop making jobs if we do this. Well, they didn't do it in

I guess a percentage of them (small percentage) will just sit on their laurels, and start spending money. Some heirs to large fortunes do that.

But, I agree with you. These people have spent their entire lives learning to play the money game. If the rules are changed, they will simply adjust the way they play the game. They aren't going anywhere.

The system is so very broken, that I'm willing to see all deductions killed off, and every person, every business in the United States charged a flat rate on income. No more special rates for stocks, bonds, etc. Income is income, no matter the source. Tax it all, with no deduction, no deferrals, nothing.

The ONLY concession I'm willing to make, is to tax net profit, rather than gross profit. But, I want a damned strict accounting of those gross and net profits.

In short, you want to replace the armies of tax collectors and auditors with armies of accountants. This might product a slight net benefit to society by permitting the so-called free market to provide competition, instead of concentrating all of these jobs within the federal government and protecting them with an anticompetitive monopoly. It will not solve the basic root problem, however, of an overcomplex tax system. It doesn't even shift the burden; either way The People pay for whatever system we adopt.

WTF? Auditing? Some special auditing made necessary by a flat tax rate?

It's really simple. Let's say the tax rate is set at 25%. My employer still provides the same earnings statement at the end of the year. My income is x, so I multiply x by 25%, and there's my tax due. Auditors? For what, exactly?

Small businesses should actually realize some small benefit. It's the same book keeping all year long. Keep track of expenses, gross revenues, etc. When you get down to the bottom line, "Net Profit" - y

WTF? Auditing? Some special auditing made necessary by a flat tax rate?

You said this:

The system is so very broken, that I'm willing to see all deductions killed off, and every person, every business in the United States charged a flat rate on income. No more special rates for stocks, bonds, etc. Income is income, no matter the source. Tax it all, with no deduction, no deferrals, nothing.

The ONLY concession I'm willing to make, is to tax net profit, rather than gross profit.

You said you wanted to tax net profit, not gross profit. Well, individuals have net profit, too. It's earnings less expenditures. We could specify necessary expenditures, which seems reasonable. In order to track the difference we're going to need a full list of all a person's expenditures. Then we'll need to classify all of them.

The alternative is that you again want to provide tax loopholes to corporations which are not available to citizens, which is grossly unfair. If you're going to tax c

I think you're obfuscating, really. Or, maybe not - there is Citizens United to consider.

Private income and business income is already vastly different, when it comes to taxes. I'm not really proposing much of a change for the average private individual. My income is presently taxed at almost 30%. Let's leave it at that. My paycheck will show 30% withholding for taxes. No deductions. With the remaining income, I can purchase a home, transportation, food, heating, air conditioning, some toys, maybe in

I'm not really proposing much of a change for the average private individual. My income is presently taxed at almost 30%. Let's leave it at that.

Oh, I get it now, because a change won't affect you, you don't care about what it will do to the poor, those who are making too much to be tax exempt but still far less than you make. But in fact, you are talking about a massive change in the basis of taxation (from graduated to flat) for all individuals, so you are now outright lying.

FFS man - don't lie. Or are you truly dumb enough to think that changing the basis of taxation is insignificant? Everyone else disagrees with you.

Attacking me, and calling me names, just shows that you're an ass with no better ideas of his own.

Making assumptions only makes an ass out of you, and umption. We start to fix it by simplifying the tax code such that corporations wind up paying taxes. See, they buy the laws, so they should pay for their execution. This should help provide some correction, if only we can enact it. Then we follow that up by pushing the corporate money out of politics, for the wi

We already see a net loss of business in America. I'm not to worried - we don't really need thousands of foreign corporations picking our bones. Let them all depart, and allow local and small businesses to pick up where the corporations have left off.

If the odd corporation actually wants to invest in America, they'll accept the tax structure.

This is normal in that generally, in the US tax code, you can defer paying taxes by paying employees more, by making investments, etc. Only if that dollar you collect becomes profit do you generally pay taxes on it.

It's not a rich vs poor thing either. Poor people get tax benefits in the form of the EIC and the personal deduction. Middle income earners get to deduct health care expenses and certain job expenses (uniforms, union dues, sometimes use of a vehicle).

The point is that everyone gets tax breaks and the reason why is that our tax code is crazy complicated. Facebook will pay their share eventually, but it's just not going to be on their 2012 return.

If Facebook eventually pays "their share" then their accountants and lawyers shoudl be fired. Most corporations in the US do not pay income tax because the system is created that way. That is why when the Obama Administration talked about raising the corporate tax rate, nobody cared. OTOH, when he talked about closing loopholes, everybody had a panic attack and the stock market dropped.

Bringing the poor and middle class into the mix is a red-herring. The poor don't have any substantial income to tax in the first place and what little is taxed via sales tax and social security is a larger percentage of their total income than what other groups pay. As for middle class tax deductions, well, yes, they can deduct some of those expenses, but businesses can deducted, not just some of them, but all of them, which is why the wealthy so often form their own corporations to deduct everything and draw a small salary, but have the corporation pay for everything. That way, the corporation doesn't pay tax, the wealthy person doesn't pay tax and everybody is happy (Actually, they do pay taxes but at substantially lower percentages than the minions who work for them).

It very much is a rich versus poor thing. Only the rich are blind to this.

It very much is a rich versus poor thing. Only the rich are blind to this.

No, only the morally bankrupt rich are blind to this. This is nearly a given, but not entirely so. One must willfully believe in bullshit to be blind to this fact, which is done in order to justify one's lifestyle so that one does not have to change in order to go on living.

EIC isn't a tax benefit. It's a welfare program for people that make so little they would be homeless otherwise. Most EIC recipients are getting more than they're paying in. It's a counterweight for massive unemployment and wage suppression brought on by huge increases in productivity and lost manufacturing jobs.

Health care deductions are similar. The insane cost of health care necessitated massive subsidies in the form of tax subsidies. Companies benefit more from those subsidies then middle income earners ever will. But again, it's a form of indirect socialism meant to prevent large social upheavals.

Now take a billionaire. He's actually the poorest man on earth. That's because he claims virtually no income. Instead, he uses his connections with banks and the US Treasury (staffed almost exclusively by former employees of Goldman Sachs, google it) to get loans at below market rates (4, 3, even 2 %). He then lives off these loans until the day he dies and wills his estate out. This is how the 1% avoid taxes by and large. Everything else is nickle and dimes.

The money is moved overseas (cayman islands) not so much to avoid taxes (they've already done that), but to make sure American don't realize why the "Greatest Nation on Earth" is suddenly broke (hint: it's not welfare, food stamps 1/1000th of our deficit, let alone our budget. Again, google it). The money can't be left sitting in American Banks because it becomes too obvious where it went. Conservative estimates put the figure at 10 Trillion, could be as high as 30 Trillion. We could pay off our national debt with that, let alone our meager deficit.

I propose simplifying the system by asserting that anyone can optionally decide to pay at the same rate that someone else is able to. If some company is able to pay 0%, then *everyone* can choose to pay 0%.

The whole "profit/deduction/tax break" boondoggle is a function of government deciding to socially engineer behavior with destructive tax policy, rather than simply collecting the bare minimum taxes necessary across the broadest base possible. Deciding what can/cannot be deducted from "profit" or "incom

I deduct a lot of money from medical and daycare this wayAnd insurance premiums are pre tax deductible as well

That's great if your employer has an FSA account. For most people, insurance premiums are not pre-tax. First, only insurance premiums from an employer sponsored plan "may" be pre-taxed and then, only if your employer has a cafeteria plan. It's not automatic and most businesses in the US do not provide it (although a large minority of them do).

To deduct medical expenses, they have to be in excess of 7.5% of your AGI. In 2012, that would mean you would need an AGI below $26,667 to be able to deduct any of your medical expense. Even with an AGI of $26,667, it is very unusaul for your itemized deductions to exceed the standard deduction, not impossible, but unusual, so if you did deduct $2,000 in medical expenses on your itemized deductions, you might want to check your tax return before the IRS does.

It is not deferred! That money is spent and gone forever. Middle income earners can deduct medical, but only if it is a huge portion of their income, I think it was like 30%. For FB this is not a tax break, it's a deduction.

It's technically 10%.

For most people it actually has to be significantly more then 10% because the IRS gives you a deduction of $5,950 for free, therefore unless your medical plus your other deductible expenses are $6,000 greater then your income you shouldn't bother deducting.

As a tax Pro I have only deducted for a couple who had $50k medical expenses and people who owned houses.

If someone exercises a stock option the company has to give them a share for $X. Since the company could have sold that share for $Y that has cost the company $Y-X (if X>Y then the option isn't getting exercised). That reduces the amount of tax the company pays since it is an expense, if they have already paid an estimated tax which didn't get the stock price at exercise time exactly right (GAAP counts the expense at option issue time and without a time machine isn't going to get it perfect) then they ar

Huh? The rich people (i.e. the people cashing out the stock options) did get taxed. Facebook, the corporate entity, didn't get taxed. Or rather, it did, it's deductions just out-weighed it's tax burden, plus it carried forward accumulated deductions from previous years.

There is also the problem that some stock options get taxed as capital gains only when the stock is actually sold. So the employee can just get a long term loan with the stocks as a collateral instead.

No, it really should not. I thought this too, for a while, before I realized the impact of what I was saying.Imagine a loan given to a farmer by Mr. Moneybags (or any investor or Angel) to purchase land for farming. Mr. Moneybags determined that 7% interest APR was fair, given the risk of the farm failing, inflation, taxes, and a small slice of profit. Farmer uses this interest to maximize the farm he can afford, so that he maximizes his own profit. Because it is a long term loan 30 years, small changes in

1. Why would you go from 15% (capital gains rate) to 60% (quadruple) taxes? A little over double seems closer to what general labor taxation.2. it's wrong to assume 100% taxation of Mr. Moneybags income, rather assume taxation on the "small slice" of profit, since the other calculations of risk should be borne out in the ledger reckoning. Thus, even quadrupling the taxes should only affect the profit portion of the interest, and should be nowhere near 60% higher.3. The financial

When you exercise your options, you (the individual) get taxed for the difference between what you paid for your newly acquired stock and the market price. For example, if the option price (what you paid) is $50, and the market price at that time is $75, the difference ($25) is taxed as if it is ordinary income, at whatever marginal tax rate applies depending on your overall income. That's at the Federal level. There is typically also state income tax on that $25 as well. That's all if you exercise the

If those rich people didn't pay any taxes like you claim, your tax burden would be *considerably* higher. I'm not saying they pay a relatively high amount of taxes, but you would probably still wish you made as much in a year as they pay in taxes.

..and this is why corporations should get to act as a "person" with regards to many laws. Thats over $100 billion in paid taxes right there for just those 12 corporations, equivalent to about ~$900 per household.

Of course they get to donate to political campaigns.. so do unions, for pretty much the same reason. Remember that this country was started specifically because of taxation without representation.

The normal thing here is someone on Slashdot didnt read the TFA. The debate is about corporate taxation not "the rich". The individuals still pay the tax on wages.It is fair (intellectually, not necissarily a correct posititon) to argue that income should be taxed twice, once at the corporation an once with the investor / employee. It is also fair (intellectually, not necissarily a correct posititon) to debate deductions. But it is knee jerk illogic to confuse a debate about corporate taxation with the deb

No, lazy is not soliciting comment, or not updating the article if facebook responds to the request.

So you're saying it's okay to slam a company (regardless of size) because they didn't respond to an RFC within a day or two?

That's unfair to do and to back up.

I say that because if i were a company (again, any size) I would be contacting a legal person (or team) to have them come up with a response that isn't going to screw me over publicly. That generally takes more than a day or two; time increases the smaller you get (meaning less money you have). For a large company like Facebook, I would imagine they

No, lazy is not soliciting comment, or not updating the article if facebook responds to the request.

So you're saying it's okay to slam a company (regardless of size) because they didn't respond to an RFC within a day or two? That's unfair to do and to back up.

So you're saying that someone with some news about malfeasance should wait until the perpetrator prepares a statement before they report it? That's not unfair, that's pure bullshit.

That is not what I'm saying. I'm saying that the use of "so-and-so didn't reply to our questions" is a superfluous and negativity-arousing phrase when there is no reasonable time given for a truthful and correct reply. Shorten that down and it basically says "stop using that damn statement because it just draws weighted attention to something rather than actual 'news'".

Demanding that anyone immediately respond and then publishing an article saying they didn't is just slander, IMH and non-legal O.

There's nothing humble about your opinion or your insistence on sharing it, especially since you consider yourself the arbiter of what news The People have a right to receive.

This is a comment on subject matter, not a power struggle. Where did you get the impression that I desire to be the "arbiter" of "rights"

Whenever such stories pop up I wonder how much it would cost your average worker to get the same effect.

How big is the overhead for setting up a few shell companies to outsource your job to yourself and move your contracor fee (formally known as salary) to Ireland and back into a non-profit with the sole profit of providing for you?

Of course when you do it as an indivual, it's tax fraud, but where's the point where it turns into SOP? Can you get together with a thousand people, set up a bogus company, Rando

The article should be: "Clueless lawmakers who have never done and honest day's work and are clueless as to how businesses actually operate wrote laws so bad and full of holes that Facebook posts billions in profits and payed zero taxes."

Please. Quit blaming the companies. They do exactly what they are supposed to do. It is 100% the fault of the lawmakers.

When you see wind farm tax breaks, do you get upset about wind power generation companies taking advantage of tax laws? All companies try to take advantage of all tax breaks. That is the way the world works. It is a fundamental truth. The tax code is somewhere in the neighborhood of 70,000+ pages. Larger companies have larger budgets for tax planning and have a greater ability to take advantage of tax breaks.

Simplify the tax code. Life for everyone will become easier. You'll put 100,000 tax consultants out of work. Perhaps they will go off and build something instead of making lots of money helping companies minimize taxes.

The big problem with your argument is that the lawmakers aren't clueless. This isn't an accident. These laws are crafted specifically to allow rich people to avoid paying taxes. The problem isn't clueless lawmakers who are getting hoodwinked, but more greedy lawmakers taking kick-backs. But even that isn't the real problem. The *real* problem is a set of beliefs, including that rich people are better than everyone else, that giving more and more money to rich people will help the economy grow, and that money is the only effective motivator of human behavior.

Every current country or territory on earth kicked the previous group out and established their own law. In fact your old world has done it several times and it's all well documented. The US was at least nice enough to give them some prime real-estate to do with as they please.

The OP was right, but undershot the problem in saying "companies are doing what they're supposed to" and blames "clueless lawmakers"; correct, but not going far enough.

The 2P is also right, in pointing out it's not simple naivete, but in fact GREEDY lawmakers who are taking kickbacks (in either power or money) for writing the laws in ways that enrich their contributors. Then he grossly overshoots the mark by going on to impute some sort of political bia

My understanding was that these tax breaks were intended to help encourage entrepreneurship, and thus make more opportunities for job creation etc. That's just the way I've always understood it anyway...

The article should be: "Clueless lawmakers who have never done and honest day's work and are clueless as to how businesses actually operate wrote laws so bad and full of holes that Facebook posts billions in profits and payed zero taxes."
Please. Quit blaming the companies

Plenty of blame to go around.

The companies drafted the laws and paid lobbyists to bribe the lawmakers to enact them.

When you see wind farm tax breaks, do you get upset about wind power generation companies taking advantage of tax laws?

No, because that is the intention of the law.

When companies make deductions for expenses in foreign countries, the intention is not that they create fake expenses in tax heavens that exactly match the profits they make elsewhere.
The intention is this: If they actually produce value in other countries, the profits from that value should be taxed there.

Example:
1: An American company deducts a million dollars for having a subsidiary with 10 programmers in Germany = OK
2: Same company deducts 100 million

When corporations keep record profits internally and pay their people minimum wage, we scream that it's not fair and they need to pay their employees more. When they pay no taxes because they paid their employees with large stock options, they aren't paying their fair share, even though the marginal rate for employees is typically higher than the tax rate of a corporation. And contrary to the implications of the article, stock options do cost the company something, they cost the company the future ability to use those shares of the company to raise investor funds.

This all said, I do agree there's an inherent unfairness to small businesses who can't easily utilize international laws to move profits to a location where corporate income isn't taxed. But unless you're trying to move more business out of the US, I don't agree that the right answer is to force companies to pay taxes on foreign income. Rather, we should be doing more to eliminate red tape and other barriers to entry faced by people that want to start a company and hire people.

This is normal, only in places where capitalism has gone wrong.
Yes, also where I live.
The lobbying powers of whatever entity have to killed entirely.
The government needs to serve the people and nobody else.
And companies are not people.

Yes, I said it, "Fuck Facebook!" Here is my off-topic rant: It is a giant waste of time contributing to the dumbing down of America and the loss of meaningful communication skills. And now, Facebook contributes nothing back by not paying any taxes!? I wish people would leave that site en masse and send it crashing down. Okay, rant over.

Consider that if there are $1B in RSUs converted from being RSUs into normal income for employees, that's $1B of employee income that gets taxed at the ordinary income tax rate, rather than $1B of corporate profits being taxed at the (much lower) corporate tax rate.

So instead of 15% of $1B, the taxes collected go up to 28% of $1B.

The reason this ends up paid by the employee instead of the company is because of the FAS rules that the government has established

First, when the employees cash in their stock options, they become liable for tax on the profits. The article doesn't mention that, which would only be slightly misleading, but that little comment at the end ("That's not to say that Facebook employees' salaries didn't get taxed.") implies that only their salaries got taxed, which is not true.

Second, the employee stock options did cost the company money--although there is no direct expense, that dilution of stockholder equity reduces the stock price. Not only today, but it was most certainly a factor when the IPO was priced.

Third, if they're getting a refund of $429 million, I'm pretty sure that's money that they overpaid and are getting back, whereas the summary is worded in a way to try make you think they never paid anything at all in 2012, and now the feds are handing them a check for $429 million.

Fourth, if you read the article instead of just the summary, it gets even worse. Facebook had a billion $ profit in 2012, after years of large losses which have been carried forward. This year they applied a billion of the accumulated prior losses in order to pay tax on $0. They have $3 billion in those prior losses still, so the article states that's $3 billion in taxes they won't pay, which is a bald-faced lie--that's $3 billion on which they will pay no tax, not $3 billion in taxes they won't pay.

The real problem is corporate executives with the clout to pay themselves next to nothing in cash and everything in stock and capital assets, taxed only when they choose to liquidate at their leisure. The fact that many corporations work around taxation and can, in this case, get a refund for having put their revenue back into the economy during the year, is not such an immortal sin as to consternate the general public.

I'm more concerned with big government stripping people of their right to free choice tha

facebook handed the keys to the facebook kingdom to government snoops and the police so they can see what everyone on facebook is doing (without a warrant). dont let the lamestream media rhetoric and govt propaganda fill your head with drivel & propaganda

The taxes are pushed off to the employees and it is there problem. What bothers me about income tax is when people Ike Steve Jobs got paid $1/year on the books and lived off their stock (I'll honestly admit I don't know how that works). So I'm for shifting away from just taxing income to taxing more in sales tax because the rich tend to have fine tastes.

Well the problem with having just sales taxes is that the larger your income the lower the percentage of your income you generally spend on consumption. And for those in low income groups almost all of your consumption is non-discretionary.

On the other hand there are some studies that show a consumption tax does favor investment over consumption - something that is a positive.

As far as stock goes, it really doesn't matter. When you get a stock option it's still taxable income.

'The employees cash in stock options, and at that point there is tax deduction for the company,' Robert McIntyre, of watchdog group Citizens for Tax Justice, said. 'Because even though it doesn't cost Facebook a nickel, the government treats it as wages and they get a deduction for it.'"

Sigh. Yes it does cost Facebook money. If they hadn't given those stock options to their employees, they could've (A) sold the shares during their IPO and made a ton more money, or (B) not issued those shares at all meani

You're right, it's too bad there's nothing between a horribly broken tax system that lets companies entirely dodge taxes on corporate profits, and communism (which is also the only alternative to capitalism).